Glenaras Gas Project


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Glenaras Gas Project (ATP 2019) – GLL 100%



The Glenaras Gas Project is contained within ATP 2019 (formerly ATP 529) in the western portion of the Galilee Basin in central Queensland. Galilee Energy Limited owns the acreage 100% and is the Operator.

The permit was identified very early as the sweet spot for coal seam gas (CSG) within the Basin and has seen considerable exploration activity over the last 15 years. Over $90 million has been spent to date including over 700km of seismic, over 20 exploration core holes and three multi-well pilots. As a result of this activity, the CSG potential is well understood and is highly prospective with an independently certified 3C Contingent Resource of more than 5,300 PJ.

The current activity at the Glenaras Gas Project is the enhanced 5-well multi-lateral pilot at Glenaras which is designed to drawdown the coal below critical desorption and produce commercial gas flow rates. This is the final step in converting the significant Resources of the Glenaras Gas Project into a maiden Proved and Probable Reserve position.


Glenaras Gas Project (ATP 2019) – GLL 100%

Contingent Resource

Since Galilee Energy resumed full ownership and control of the Glenaras Gas Project in late 2015, the number one priority for the Company has been to prove up the potential of this project as a major new source of gas.  This creates a material opportunity as foreseen by Galilee, arising from a looming gas supply shortage which is now a daily news item.

The Company’s flagship Glenaras Gas Project (“Project”) (Figure 1), has one of the largest remaining uncontracted gas resources on the east coast of Australia with an independently derived and certified Contingent Resource+ within the Betts Creek coals with a 1C of 308 PJ, a 2C of 2508 PJ and a 3C of 5314 PJ. The Company’s primary focus is on converting these Contingent Resources to Reserves.


Figure 1

ATP 2019 Units 2015 (MHA)
Low estimate Contingent Resources (1C) PJ 307.8
Best estimate Contingent Resources (2C) PJ 2,507.5
High estimate Contingent Resources (3C) PJ 5,314.1
Coal Seam Gas Properties

A successful coal seam gas project requires three key parameters:

 – Resource Concentration (thickness, gas content)          
 – Productivity (thickness, permeability)       
 – Pressure drawdown in the coal (well design)

The Betts Creek coals within ATP2019 have excellent resource concentration and coal productivity and this has been proven across the entire permit through the extensive exploration history.  The average coal properties within the Permit are shown in the table below:

Coal depth (m) 900 – 1,000
Net coal (m) 19
Gas content (m3/t) 5.3
Permeability (md) 45
Resource concentration (bcf/km2) 5.2

An average coal thickness of 19m combined with gas contents of ~5.3 m3/tonne represent world class levels of resource concentration and compare well with some of the best CSG fields in Queensland.  An average permeability of ~45md is excellent for CSG developments.


Figure 2

The historical challenge in the Galilee Basin has been the ability to depressure the coal sufficiently over a large enough area in order to achieve commercial gas flow rates.  The primary issue in this area has predominantly been poor well design along with poor artificial lift selection.  Historically, all production wells and pilots drilled in this permit have used vertical wells which have been either fracture stimulated or left with open-hole under-reamed sections.

As can be seen from the log section displayed on this page of a typical Glenaras well, Glenaras 4, the Galilee Basin is unique in that there are several sandstone units interbedded within the Betts Creek coal system.  While these sandstones vary dramatically in thickness and permeability and have limited connectivity with the coals, they do present a well design challenge and need to be restricted from contributing to production.

Unfortunately, the two five-spot vertical pilots that tested the CSGs potential of the entire Betts Creek coal section, the Rodney Creek pilot (drilled and tested by Galilee Energy in 1994-2004) and the Glenaras pilot (drilled by AGL as part of a farm-in in 2008) both applied fracture stimulation which opened up these sandstone units to production.  The pilots produced high water rates however a large proportion of this water was derived from the sandstones and not the coals and therefore was not adequately depressuring the coals sufficiently to achieve desorption and subsequent gas production.  These problems were amplified by using artificial lift systems that were not applicable to the higher temperature seen in this area of the Basin.  Despite these design flaws, both pilots did achieve gas production, with the Glenaras 5-spot achieving irregular gas flow rates of up to 120 Mscfd.

The current management team believe that a simpler approach to well design could achieve the objective of depressuring the coal, achieving desorption and producing commercial gas flow rates.  The aim being to complete the wells, either vertically or laterally, without directly connecting to the sandstone units.  This can be achieved by either simple vertical cased wells that are perforated in each of the coal units only, or by lateral completions staying wholly within the coal.  The current multi-lateral Glenaras pilot is testing the latter technique through targeting the R3 coal with horizontal wells to depressure a large area and achieve commercial gas flow.  The new pilot is located to access key nearby infrastructure including the camp, flare and gathering systems and the existing Glenaras water storage pond.

Permit Administration

On the 28th November 2016 the original permit area, ATP 529, was converted to the new 2004 Petroleum and Gas Act and granted as ATP2019. The permit area remains the same.

This conversion allows much greater flexibility in moving the permit to higher forms of tenure such as retention leases (or Potential Commercial Areas) or to Petroleum Leases for production. The tenure is now fully secure for its final four-year exploration term.

Glenaras Multi-lateral Pilot

The design work for the Glenaras multi-lateral pilot was completed in late 2017 and the first phase of the pilot drilled in mid-2018 with the drilling of Glenaras 10, 10L, 11L and 12L. The original pilot was designed as a three well lateral pilot located in an area approximately equidistant between the previous Glenaras and Rodney Creek pilots.  This location was selected based on existing seismic, corehole and production well data.  This data shows a simple anticline structure ideal for lateral drilling and is in area known for consistently good coal development in the R3 coal.

The first lateral in the programme included a pilot vertical hole, Glenaras 10, which was drilled to assess coal quality, sand isolation and permeability in order to select the optimal coal target.  The three lateral wells were then separately drilled through this target R3 coal.  The design was based on a 250m spacing between laterals and approximately 500m in-seam lateral lengths.

The pilot design involved a multi-lateral pilot, with two evenly spaced parallel laterals shielding the central coal area between the two wells. This configuration allowed the central reservoir area to be drawn down below critical desorption pressure and achieve commercial gas rates more rapidly. The new pilot location utilised existing production facilities including the camp, water storage pond and surface pumping equipment.

The Company was successful in drilling Glenaras 10L and 12L.  Easternwell Rig 101 commenced drilling operations with the Glenaras 10 well in March 2018. In April, Glenaras 10L, the central well in the pilot, was successfully drilled as planned with approximately 520m of net coal intersected in the well through the R3 coal seam primary target. In May, Glenaras 12L was successfully drilled with approximately 480m of net coal intersected through the R3 coal seam. Due to drilling issues, the third lateral well, Glenaras 11 was then utilised as an observation well to determine reservoir pressure drawdown. Given the high quality of the coal encountered and the challenges with lateral drilling in this coal, the pilot was limited at the time to a two well lateral with production from the Glenaras 10L and 12L laterals.

The two Glenaras pilot wells, 10L and 12L, performed strongly during production testing with rates of ~4000 BWPD achieved from the combined pilot.  These results are consistent with draining coal within a high quality, bounded coal seam with no evidence of material contribution from adjacent sandstones. Following peak water rates, the water production started to decline consistent with modelling.  Once the wells achieved pressure below the critical desorption pressure, gas flow commenced. Metered gas rates, measured via orifice plate meters at each well separator, increased in the early periods but then remained relatively stable at ~20-25 Mscfd.  Water rates also stabilised at this time to approximately 3,000 BWPD (barrels of water per day) in aggregate.

Evidence of pressure communication between each of the lateral wells suggested the pilot was accessing a significant drainage area which augured well for economic gas recovery once the coal seam depressurised below the critical desorption pressure.

Analysis from the extended pilot testing indicated that additional wells would be needed to properly draw down the pressure in the coal over a larger area in order to achieve the required commercial gas rates. With respect to the initial lateral pilot, which sought to draw down the pressure in a relatively small area of coal, the high permeability of the R3 coal caused the two lateral wells to drain a considerably larger area of coal. This outcome significantly increased the water production volumes required before reaching the critical depressurisation threshold which is then the trigger for gas desorption and gas flow from the coal. Therefore, the well density near the pilot needed to be increased in order to accelerate water production and more efficiently lower the pressure below critical desorption to achieve the desired commercial gas rates.  A more efficient design of the pilot to achieve better shielding of a central producing well is also instrumental in accelerating this depressuring of the coal and subsequent gas desorption in the pilot area.

To achieve this, Galilee reverted to the original pilot design with additional shield optimisation.  This comprised the implementation of a three-well lateral enhancement of the existing lateral pilot as shown in Figure 1.  The aim was to continue to use the excellent results of Glenaras 10L and 12L, such that they would now behave as shield wells to a new central lateral, Glenaras 14L. The Glenaras 14L lateral is located in the middle of the existing pilot and will be the key well to drawdown the central area of the pilot below critical gas desorption pressure.  This is similar to the original pilot design of Glenaras 10L, 11L and 12L but now on a tighter well spacing.  To ensure shielding over the central area of the pilot, Galilee drilled perpendicular laterals (Glenaras 15L and 16L) across each end of the Pilot in order to ensure there is no water support from either of these directions.  Galilee is very confident that this design will create both the required well density and shielding in the pilot area to drawdown coal over a large enough area to achieve its commercial gas flow objectives.

Figure 3


A drilling programme to achieve these objectives was conducted during the second quarter of 2019.  The Company was successful in drilling a further three lateral wells, Glenaras 14L, 15L and 16L, to enhance to the performance of the existing pilot, and to significantly improve the shielding of a central lateral well. This programme was achieved safely, on time and on budget during the 2nd quarter of 2019.

The Company now have a well-designed, shielded five-well lateral pilot in excellent coal which now provides the platform for us to drawdown a large area of coal below critical desorption pressure and hopefully progress to material gas rates.

The gas and water pipeline installation has commenced, and a workover rig has been secured to commence mid-June with an expected two-week duration. The aim is for the new lateral wells to be on production by early July 2019 following the necessary completion and tie-in operations.

Once the Pilot is fully operational, the well configuration will provide shielding to the central well from the large area which the previous two lateral wells were draining. It is expected that three months of production drawdown will be required for material gas production rates to be observed.

The expected cost of this additional three-well lateral programme including drilling, completion and tie-in is approximately $8 million, which is well within the Company’s strong cash position.

A successful Pilot achieving commercial gas rates has the potential to book 500 PJ+ of Proved and Probable Reserves. The Pilot will be on production for an extended period to de-water and lower the pressure in the surrounding coal to achieve gas flow.


Stakeholder Issues

The Glenaras Gas Project is focussed on strong stakeholder relationships and its social license to operate.  The land use in the area is flat, open sheep grazing country with large scale land holdings of 50,000+ acres.  The company has preserved strong relationships with both landowners and councils in the region over many years.

The area has experienced many years of drought so a new industry, as such a new source of water is welcomed in the district.  One of the significant advantages of this project over other CSG operations is the water quality produced as part of the CSG dewatering process.  The water here is very high quality with total dissolved solids of only ~1100 ppm.  This allows the produced water to be utilised for many agricultural purposes with minimal processing.  This provides a unique opportunity for landowners and a significant operating and capital cost reduction for future field development due to minimal processing requirements.


Commercial and Market

One of the significant developments throughout the last two years has been the increasing gas supply shortfall in the East Coast Australia gas market. The Federal Government’s AEMO has flagged a growing shortfall in domestic gas supply as shown in the Figure below (see Figure 5). This has resulted in much media and Government attention and reflected a significant increase in wholesale gas prices on the east coast. This has resulted in increased attention on new supply options such as the Glenaras Gas Project and there is now strong support from all levels of Government to assist with unlocking this valuable asset and connect to market.


Jemena Memorandum of Understanding

In October 2017, the Company announced the signing of a binding MOU with Jemena to work together to deliver the Galilee Energy’s Glenaras Gas Project in the Galilee Basin in central Queensland to the east coast domestic market.

Jemena has made significant progress on the planning of its Galilee Gas Pipeline, which would run from the Glenaras Gas Project to the east coast gas market.

Ongoing engagement with landholders and findings from initial constructability and ecological surveys has enabled Jemena to be well advanced in their pipeline route development.

In-field ecological surveys are currently underway in anticipation of progressing environmental approvals.

* The estimates of contingent resource estimates were determined by Mr Tim Hower, a full time employee of MHA Petroleum Consultants LLC., Denver, Colorado, USA, on 1 September 2015, in accordance with Petroleum Resources Management System guidelines. Mr Tim Hower is a Licensed Petroleum Engineer in the State of Colorado, a qualified person as defined under the ASX Listing Rule 5.41 and has consented to the use of the contingent resource figures in this announcement.